Sprint Gives Up On T-Mobile, Replaces CEO

According to an article published in the Wall Street Journal on August 5th, Sprint Corporation (NYSE:S) is throwing in the towel in its effort to acquire rival T-Mobile due to high regulatory hurdles.

Although there has been no official announcement yet, WSJ sources say the firm decided on Tuesday to give up on its pursuit of T-Mobile US Inc. in the face of unrelenting opposition from regulators. The decision was also apparently made to replace current CEO Dan Hesse with Marcelo Claure, a billionaire entrepreneur who has no formal experience in the wireless arena.

The decisions were taken at a Sprint Corporation (NYSE:S) board meeting Tuesday,

Too much regulatory opposition

Giving up on the T-Mobile deal at least will spare Sprint a long and possibly fruitless antitrust battle with regulators. The two carriers had been negotiating the deal for several months. However, regulators had also made it very clear they opposed any further consolidation of the already concentrated U.S. wireless telecom industry.

Regulators’ major concern was that a deal combining the country’s third- and fourth-largest wireless carriers would result in consumers having fewer choices for service, especially low-income consumers.

Top Sprint Corporation (NYSE:S) met officials at the Justice Department and Federal Communications Commission last year and were told that any deal would face great scrutiny. In what might have been the nail in the coffin for the deal, the FCC announced last week it was proposing rules that would prevent Sprint and T-Mobile from bidding together in an important upcoming spectrum auction.

Of note, a couple of analysts have already gone on record saying they expect the deal still might happen a year or two down the line.

Sprint network overhaul complete

Sprint has been involved in an extensive network overhaul for the last several years. This has led to spotty service quality and made it tough for the nation’s third largest wireless carrier to bring in new customers. The new network is largely complete now, and Sprint announced last week it is developing new pricing plans in preparation for a major subscriber push in the fourth quarter of this year.

Winning back customers will not be easy. Sprint Corporation (NYSE:S) has lost money every year since 2007, when a poorly-timed merger with Nextel left it saddled with a hodge-podge of network technologies leading to poor customer service. The company was taken over more than a year ago by SoftBank Corp. , but the Japanese company’s CEO, Masayoshi Son, has had little success in changing Sprint’s culture.